How Donating A Junk Car Benefits Your Tax
If you have a junk car in Detroit, you might be thinking about selling it to a salvage yard. Before you do this, you should consider how donating the car to charity could benefit you more. The benefits that you get from donating the car to charity will become apparent when tax season comes.
How Donating The Car Helps With Tax
Donating your junk car to charity will help you when it comes to filing your taxes. This is due to the fact that the donation is classed as a charitable contribution. Charitable contributions are tax deductible which means that with some planning you could lower your taxable income.
When it comes to deducting the car donation, there are 2 ways that you can do this. If the charity sells the car, you will need to use the sale price as the deduction. However, if the car is used by the charity for any purpose, you can use the fair market value. As you are dealing with a junk car, it is likely that the charity will sell it.
Find Out The Sale Price
The IRS requires you to use the sale price of the vehicle on your tax return when the charity has sold it. This means that you need to find out what the sale price was. If the charity sold the junk car for $2000, you will only be able to claim $2000 on your tax return.
The charity that you donate the car to should be willing and able to tell you the sale price. If possible, you might want to ask for some documentation which details the price of the sale. This can help if the IRS asks any questions about the sale price you list.
Claiming Your Deduction
When tax time comes, you will need to report the charitable donation on line 17 of Schedule A. When you do this, you need to know what your filing status is. This will help you claim your deduction and help you get the most out of the car donation.
It is important to note that you will only be able to claim the deduction if you itemize. This is where tax filing systems might come in handy as they will be able to do this for you.
Additional Forms To Complete
If your car donation exceeds $500, you will need to complete Form 8283. If the deduction you are reporting is between $501 and $5000, you have to complete section A of the form. If the deduction is greater than $5000, you will need to complete section B. If you have to complete section B, you will need to get a written appraisal of the vehicle as your documentation.
As you are donating a junk car, it is possible that the charity will sell it for less than $500. If this is the case, you can deduct $500 or the fair market value depending on which one is lower. This means that if the car was sold for $400, but has a market value of $650, you will be able to claim $500.